Option a Provides $9,000 with Probability 50 Percent or $11,000

question 26

Multiple Choice

Option A provides $9,000 with probability 50 percent or $11,000 with probability 50 percent. Option B provides $8,000 with probability 50 percent or $12,000 with probability 50 percent. For most people the cost of risk associated with B is

• A) less than that associated with A.
• B) the same as that associated with A.
• C) exactly twice that associated with A.
• D) more than twice that associated with A.

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Definitions:

Production Function

Describes the relationship between inputs used in production and the output generated from those inputs.

Output

The total amount of goods or services produced by a firm or economy over a specific period.

Marginal Product

The additional output that results from using one more unit of a production input, keeping all other inputs constant.

Fertilizer

A chemical or natural substance added to soil to increase its fertility and promote plant growth.